CUNA Regulatory Comment Call

June 25, 1999

Fed Proposal to Allow Lenders to Collect More Data on Borrowers

On June 23, 1999, the Federal Reserve Board (Fed) unanimously agreed to issue a proposed rule containing changes to Regulation B, which implements the Equal Credit Opportunity Act (ECOA). The proposal would permit lenders to voluntarily collect more data on borrowers, including information on their race, religion, gender, and national origin. Comments on the proposal are due within three months after the rule is published in the Federal Register, which should be in the next few days. Please submit your comments to CUNA by September 15, 1999, by fax at (202) 371-8240 or e-mail to CUNA's Assistant General Counsel Jeffrey Bloch at jbloch@cuna.com. You may also contact us if you would like a copy of this proposal, which is not yet available on the Internet.

BRIEF BACKGROUND

Currently, the ECOA prohibits lenders from making credit decisions on non-mortgage loans based on certain prohibited factors, such as the race, religion, gender, and national origin of the borrower. In March 1998, the Fed issued an advanced notice of proposed rulemaking, which solicited input on the issue of whether lenders should be permitted to collect such information. The Fed received 330 comment letters and is now issuing a proposed rule that would permit such collections.

BRIEF DESCRIPTION OF THE PROPOSAL

Although the proposal would permit the voluntary collection of information regarding race, religion, gender, and national origin, borrowers would not be required to provide such information if they choose not to do so. The proposal would also require lenders to retain records on prescreened credit solicitations. These records would include the list of criteria used to select potential recipients, the solicitation used, the correspondence related to the solicitation, and the marketing plan to which the solicitation relates. Lenders would also be required to retain business credit records for 25 months, rather than the current 12 months.

QUESTIONS TO CONSIDER REGARDING THE FED'S REGULATION B PROPOSAL

Are you concerned that the additional data could be used unfairly by the regulators and the Justice Department?

Do you believe that the proposal will increase regulatory burden? For example, do you believe examiners will pressure lenders to collect this additional data or otherwise place lenders under special scrutiny to insure that the data is not used to discriminate?

Do you believe that the collection of the additional data would facilitate discrimination by a lender's employees or do you believe that the collection would assist regulators and the Justice Department in their efforts to uncover such discrimination?

Should the changes to Regulation B include standards describing how the additional data should be collected or would such standards place unnecessary additional burden on lenders?

Do you believe that the collection of the additional data would assist lenders in efforts to target underserved markets?

Would the provisions regarding the retention of records on prescreened credit solicitations hinder your marketing efforts?

Do you believe credit union members would regard the collection of the additional data as an invasion of privacy?